A Chinese city celebrated for its cut-throat entrepreneurs has launched a pilot project allowing individuals to invest directly overseas in a move that could signal greater opening of the country’s tightly controlled capital account.

The eastern city of Wenzhou will allow individual residents to spend up to $200m a year in offshore investments, according to an announcement on the city government’s website.

Chinese individuals are now only allowed to buy up to $50,000 worth of foreign exchange each year. But, under the pilot programme, Wenzhou residents will be able to apply for much larger amounts as long as their investments meet certain criteria.

The Wenzhou government said the programme was meant to encourage more overseas investment by individuals, establish a regulated overseas investment channel for individuals and strengthen the government’s ability to manage cross-border investment flows.

“Individuals already use unauthorised channels to obtain foreign exchange and make investments overseas,” the government said, an acknowledgement that many investors get around China’s strict capital controls by using underground or illegal moneylenders.

Under the pilot project, individuals are forbidden from investing in overseas companies in the financial, energy or mining sectors and are also not allowed to invest in countries without diplomatic relations with China.

Wenzhou residents cannot exceed $3m with any single investment abroad, while the combined investment by multiple investors in a single project is limited to $10m.

But analysts sounded a note of caution over how quickly the programme would be implemented and rolled out across the country. Officials at China’s central bank and the State Administration of Foreign Exchange, whose approval would be necessary for the scheme to go ahead, declined to comment. The central bank announced a pilot project in 2007 that would allow individual mainland Chinese investors to buy Hong Kong equities via the port city of Tianjin but the plan was quickly shelved.